The Lenskart Solutions Ltd. stocks also declined at their debut despite the oversubscribed IPO because investors doubted their valuation and timing.
The long awaited IPO of the largest Indian company in the organized eyewear retail category, Lenskart Solutions Ltd, could have attracted a lot of investor attention to the IPO, but performance upon listing tells a different tale.
Whereas the company made an issue of an impressive Rs 7,278 crore accompanied by a strong subscription, and the shares on listing day fell drastically after the issue price, the question that arises before investors and analysts is whether or not the downgrading was the result of excessive hype or just an inopportune time in the market.
Strong IPO but Weak Listing
The price given to the IPO by Lenskart was within the RS 382-Rs 402 band and estimated the business near to Rs 70,000 crore on the higher end.
The merger involved a new issue of approximately Rs 2,150 crore together with a new offer for sale of approximately Rs 5,128 crore.
The interest of retail, institutional, and anchor investors amounted to a lot; the IPO was many times oversubscribed.
This, however, did not take the market very well after the shares were listed. The stock price of Lenskart decreased by up to 11 percent on its initial day of trading and hit approximately Rs 356 and then ranged nearly Rs 392.
This was the contrary of the pre-listing excitement and brought a question of the true valuation and market preparedness.
Why the Drop?
- Valuation issues: Analysts have pointed out that though Lenskart reported a profit in FY25 (around Rs 297 crore on revenues of around Rs 6,652 crore) after the previous losses, the implication of the valuation was that Lenskart is trading at hundreds, which many deem stretched.
- Market timing: The IPO was launched at a time when several other giant issues had been priced and the investors were more cautious. The overall investor interest appeared to be waning, as there were a large number of new age technology and consumer stock IPOs being listed around the same period.
- Hype vs. fundamentals: There may be excessively high expectations of the issues ahead, for which the strong grey-market premium before the issue may have established an unrealistic standard. Some of the investors might have left when the shares failed to provide immediate returns.
- Execution risk emerges: Although the growth and profit turnaround of Lenskart are looking good, any newcomers in the public market would be seeking evidence of future performance and not past performance. The push to expand the margins, roll out, and competition of stores all loom large.
To those involved in the IPO who may have been expecting a quick gain soon to be listed, the result may be frustrating. It can act as the warning that good subscription results are not necessarily listed results.
The decline is also a wake up call to retail investors to pay extra attention to valuations and business models instead of hype or promotion stories.
In the long term, Lenskart still possesses such advantages as the presence of a large network of stores, a clear position in the Indian eyewear sector, growing international activities, and an earning position.
The success of the stock to emerge as a strong performer will be determined by the efficiency with which the company deals with the expansion, margin pressure, and expectations of the investors.
Simply stated, the IPO saga at Lenskart is one full of both success and tainted reality. The firm has removed a big, well known product, but the fact that it was listed gives the impression that shareholders are increasingly critical.
This may be nothing but a bad timing event, or it may be an indication of a greater caution in the market, but one thing is certain, this time around, the retail and institutional investors are not satisfied with the buzz, they want the numbers.
